SBA 504 loan origination growth continued to progress at an accelerated pace in the fifth month of the 2020 fiscal year.
Through February 28, 2020, SBA 504 loan originations were up 35.8% compared to the prior year, reaching $2.55 billion year-to-date in FY2020 versus $1.88 billion during the same period in FY2019. The unpaid principal balance of outstanding 504 loans stood at $25.83 billion as of December 31, 2019, up 0.2% compared to the $25.77 billion figure at year-end FY2019. In contrast, SBA 7(a) loan originations are down 11.7% year-to-date (through February 28) to $8.58 billion and the unpaid principal balance of 7(a) loans was $95.37 billion at December 31, 2019, up 3.0% compared to year-end FY2019.
While 7(a) loan outstandings continue to grow at solid pace (2.9% in FY2019 and 7.2% in FY2018), 504 loans have remained in a fairly tight range between $25 billion and $27 billion over the last nine years. Of course, the chart above includes only the CDC/SBA second lien portion of a 504 loan package, which typically amounts to roughly 40% of the financing. The first lien loan, usually supplied by a bank or other private sector lender, typically provides another 50% of the project funding.
Loan originations in the 504 program are growing substantially so far five months into FY2020. Total originations in 2020 through February 28th are well in excess of the volumes achieved at this point in any of the last five years. The smallest category, loans of less than $150k, remains low as a percentage of overall volumes at roughly 1% of the total, despite YTD growth of 22.3% in originations compared to last year. Originations of loans between $150k and $350k are up 18.2%. However larger size loan originations are growing even faster, as loans between $350k and $2 million are up 35.9%, and loans of greater than $2 million are up 40.3% compared to the prior year.
News Blurb of the Week – Focus on CRA reform message, not the messenger Kenneth H. Thomas, The Hill
March 6, 2020 – The House Financial Services Committee recently held two hearings on the Office of the Comptroller of the Currency’s (OCC) and Federal Deposit Insurance Corporation’s (FDIC) proposed rulemaking to reform the Community Reinvestment Act (CRA). Rather than focusing on the message of reform, lawmakers and others at these hearings primarily attacked the messenger.
